DBRS Confirms Provisional Rating of CLEAN 2018-1

DBRS, Inc. (DBRS) confirmed its provisional rating for the following class of notes (the Notes) to be issued by CleanFund Commercial PACE 2018-1 LLC (the Issuer):

-- $103,570,000 Class A Notes at AAA (sf)

This rating action is in conjunction with certain credit-positive structural modifications to the transaction. The modifications generally increased credit enhancement for the Notes as follows:

(1) The Notes’ balance was reduced to $103,570,000 from $109,325,000;
(2) As a result of the Notes’ balance reduction, overcollateralization increased to 10% at closing from 5%;
(3) After the Optional Redemption Date (i.e., the date when the collateral reduces to a 10% pool factor), 100% of available funds after (a) payment of senior fees, (b) payment of Note interest and (c) top up of the Liquidity Reserve Account to the required level in the waterfall will be allocated to pay down the Notes;
(4) The Required Overcollateralization Amount is equal to 10% of the current collateral principal balance plus the amount of any delinquent principal payment due on any Property Assessed Clean Energy (PACE) Assessment; and
(5) The Liquidity Reserve Account floor was increased to 75 basis points (bps) from 50 bps of the initial collateral balance.

The presale report was updated to reflect the above changes to the structure.

The ratings are based on a review by DBRS of the following analytical considerations:

-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, a liquidity reserve and excess spread. Credit enhancement levels are sufficient to support the DBRS expected default and loss severity assumptions under various stress scenarios.
-- The value of the commercial properties that secure the underlying PACE Assessments relative to the outstanding balance of the PACE Assessments, and the priority of the PACE Assessments being senior to a first-lien mortgage.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the rating addresses the timely payment of interest on a semi-annual basis and the payment of principal by the Scheduled Maturity.
-- The capabilities of CleanFund Commercial PACE Capital, Inc. (CleanFund) with regard to origination and underwriting. DBRS performed an operational review of CleanFund and considers the company to be an acceptable originator of PACE Assessments.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the Issuer with the Transferor, that the Issuer has a valid first-priority security interest in the PACE Asset Portfolio and consistency with DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.
-- Review of legal considerations specific to PACE.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating U.S. Property Assessed Clean Energy (PACE) Securitizations, North American Single-Asset/Single-Borrower Methodology and Rating U.S. Structured Finance Transactions, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the attached appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.